Get Help With Insurance, Inc.

A selection of insurances, called generally “Statute and Title Errors and Omissions” is recommended for auto dealers as they face certain risks not present to other businesses. These products provide coverage for economic damages not based on bodily injury, personal or advertising injury, or property damage. 

Simply put, Auto Dealers Errors & Omissions covers economic damages for negligent violations of truth in lending laws, odometer statutes and lemon laws.

Everyone should read their policies carefully.  In the case of statutory title E&O coverage, the typical form covers liability for an “act, error or omission” as a defined term.  The term is usually defined to cover only negligent acts, not intentional ones.  Moreover, coverage would not be provided for liability assumed under contract.

• Truth in Lending E & O coverage:  covers for damages due to an error or omission causing a breach in the Truth in Lending Act portions of the Consumer Credit Protection Act. The federal Truth in Lending Act (TILA) requires lenders to give you specific disclosures about important terms, including the APR, before you are legally obligated on the loan.
• Odometer Statute E & O coverage:  covers damages arising from a failure to comply with Title IV Odometer Requirements of the Motor Vehicle Information and Cost Savings Act, and local state laws on the same subject.  The law was passed to address shady practices from certain dealers who would ‘roll back’ high mileage vehicles to make those vehicles more attractive to buyers.  Although these practices are not common today, this coverage is still available.
• Lemon Law coverage:  Lemon laws are United States state laws that provide a remedy for purchasers of cars and other consumer goods in order to compensate for products that repeatedly fail to meet standards of quality and performance. Although many types of products can be defective, the term “lemon” is mostly used to describe defective motor vehicles, such as cars, trucks, and motorcycles.
  • The lemon law covers damages arising out of a buyer’s statutory right to return a vehicle for failure to perform adequately.
• Prior Damage Disclosure coverage:  covers damages for negligent acts, errors or omissions resulting from non-compliance with federal or state statutes requiring disclosure of prior damage to a sold vehicle.  The insurer’s obligation is limited, however, to the difference between (1) the vehicle’s market value as represented when sold to the purchaser, and (2) the actual market value of the vehicle accounting for the prior damage.
• False Pretense — refers to an exclusion in the physical damage coverage portion of a garage coverage form eliminating coverage for losses the insured suffers due to the fraudulent acts of others. Examples of false pretense include a customer absconding with an automobile on the pretense of test-driving it, the insured selling an automobile and receiving a bad check for it, and the insured selling an automobile and being instructed to deliver it to the wrong party because of fraudulent instructions. The exclusion can be negated by adding false pretense coverage on the garage liability policy. This endorsement covers the insured when a covered automobile is taken in a fraudulent manner. It also covers losses caused by the insured’s acquiring an automobile from a person who did not have legal title. Coverage is most needed by automobile dealers but may also be desired for banks that sell repossessed autos to the public.
  • One way this endorsement will help protect you is in adding coverage for loss to a covered auto that you possess, caused by the fact that someone dishonestly sold you a car that they don’t really own. Imagine your loss if you purchase a car with a bad title. The true owner tracks the car to your lot and demands that you return it to them. Or worse, if you have already sold the car,  then your customer comes back to you to collect the value of the car that you sold to them with a bad title and that they had to return to the true owner.
• Drive Other Car Endorsement — a commercial auto endorsement designed to provide nonowned auto coverage under a commercial auto policy similar to that which would be provided under a personal auto policy (PAP). The drive other car coverage—broadened coverage for named individuals (CA 99 10) endorsement is commonly used when an executive officer, for example, does not carry personal auto insurance because he or she is furnished a company auto. Coverage under the endorsement would come into play in the event the individual designated in the endorsement (including his or her resident spouse) is driving a nonowned auto for personal use. Coverage under the endorsement does not apply if the auto in question is owned by that individual or by any member of his or her household; or the auto is used by either of these individuals while working in a business of selling, servicing, repairing, or parking autos.
• Hired Automobile — term used (“hired autos”) in the Insurance Services Office, Inc. (ISO), business auto, garage, and motor carrier coverage forms to denote a particular type of auto included as a covered auto under the policy. With certain exceptions, the term refers to autos the named insured leases, hires, rents, or borrows. As respects both the business auto and the garage policy, the term does not include any auto the named insured leases, hires, rents, or borrows from any of its employees, partners, limited liability members, or members of their households. As respects the motor carrier, the exception applies as respects private passenger type autos only.
• Nonowned Automobile — described in commercial auto policies as an auto that is used in connection with the named insured’s business but that is not owned, leased, hired, rented, or borrowed by the named insured. As used in the business auto policy (BAP), the term specifically applies to vehicles owned by employees and used for company business; as used in the truckers and motor carrier policies, it applies only if such autos are private passenger type autos. (Autos other than private passenger type owned by employees are classified as hired autos in the truckers and motor carrier policies.)
• Collision Damage Waiver (CDW) — an agreement with an auto rental company in which the renter is released from liability for collision damage to the vehicle in exchange for a fee, subject to the terms of the rental agreement or a state statute if one exists. It is not insurance but a contractual obligation subject to many restrictions.
• Fire Legal Liability Coverage — coverage of a tenant’s liability for damage by fire to the rented premises (including garages) the tenant occupies; such coverage is usually provided as an exception to policy exclusions applicable to property in the insured’s care, custody, or control (CCC). Under the standard commercial general liability (CGL) policy, fire legal liability of the named insured is covered subject to the “damage to premises rented to you” limit.